Should I refinance my rental property?

Question

I have a rental property that still has a 22 year mortgage (originally 30-year) at fixed interest rate of 3.125% with monthly payment of $1750. I have encountered an opportunity to refinance at 15-year fixed loan of 2.625% (no point, no fee) for $350K (still owed the bank). I have done a deal analysis and with refinance, my monthly payment is $2354 and saved $38280 total. Should I refinance? If I do, what other things I still need to consider? Thank you.

Elise Marquette · Answer

You can always pay more every month- I always advise my clients to be wary of committing themselves to a 15 year mortgage. At the end of the day, if it's an investment property, there's not always a lot of need to own it free and clear as long as it's cash flowing. Do you plan on owning it for the next 15 years?

Percy Matsunaga · Answer

@Jacky Johnson

Oh I think I read it wrong. So now you have a mortgage payment of $2300 and if you refinance your payment will be $1750.

If that the case, I would most definitely refinance 100%!

Jacky Johnson · Answer

What if I refinance just to lower the number of years on the loan? I don’t want to pay that extra $600 because I want to more cash in hand. Is that ok?

Percy Matsunaga · Answer

@Jacky Johnson

I think this would be more of a personal preference. Here are some questions I would ask.

Do you really need to refinance right now? Is there a reason besides lowering the amount of years on the loan?

Could you use that extra $600 potentially to help pay down the principal